Joe Spak

Joe Spak from UBS inquired about the estimated annual revenue for Lear's large conquest win and its launch timeline relative to the 2027 backlog. He also asked about the status of negotiations and payments from OEMs for canceled EV programs, whether any are embedded in the 2026 outlook, and their placement in the financial walk.

Answer

Jason Cardew, Senior Vice President and CFO, clarified that the large conquest win launches in late 2028, benefiting 2029, and is not in the 2027 backlog. He mentioned $800 million in total conquest awards for 2025 across Seating and E-Systems. Regarding canceled EV programs, Jason Cardew stated that major negotiations are largely complete, with some cash benefit embedded in the 2026 guidance and some deferred revenue appearing in the 'other' category of the financial walk. Ray Scott, Lear President and CEO, reiterated a strategic focus on high-volume, long-history programs for future growth.

Joe Spak from UBS asked for confirmation on the estimated annual revenue of $400 million-$500 million for the large conquest win, whether it's included in the 2027 backlog, and when capital spending for this win might begin.

Answer

Jason Cardew, Senior Vice President and CFO, confirmed that the large conquest win is outside the 2027 backlog, expected to launch in late 2028 and benefit 2029. He mentioned that Lear had approximately $800 million in conquest awards across Seating and E-Systems in 2025 and has a $1.5 billion pipeline for Seating conquest opportunities in 2026. Ray Scott, Lear President and CEO, emphasized Lear's strategic selection of programs with long history, strong brands, and good volume. Joe Spak then asked about OEM payments for canceled EV programs, inquiring if discussions were complete and if any payments were embedded in the 2026 outlook. Jason Cardew stated that major negotiations are largely complete, with some cash benefit embedded in 2026 guidance, and noted a positive surprise in Q4 net performance from these settlements. Joe Spak followed up, asking if these recoveries were included in the 'other $265 million' in the financial walk. Jason Cardew confirmed that some deferred revenue from these agreements appears in 'other' for Q4 and 2026.

Joe Spak asked for clarification on the -$37 million outflow shown in cash from commercial negotiations, specifically regarding the timing of booking versus actual cash flow.

Answer

Mark Oswald, Executive Vice President and Chief Financial Officer, clarified that the -$37 million outflow represents a timing mismatch where commercial recoveries benefited Q1 earnings but the actual cash payment is expected to positively impact free cash flow in the back half of the year.

Joe Spak asked about the expanding pie of growth opportunities, particularly regarding reshoring decisions and whether customers are looking to move more production to North America beyond the current 2027 timeframe. He also questioned if Adient now has better line of sight for EMEA margin improvement to kick in by 2027, and sought clarification on the -$37 million cash outflow from commercial negotiations, specifically if it was a timing mismatch.

Answer

President and CEO Jerome Dorlack confirmed an acceleration in onshoring discussions, especially with Japanese OEMs, seeing potential tailwinds beyond current projections for 2028-2029, contingent on OEM capital allocation and USMCA developments. He stated that Adient is ideally suited to capitalize on this. For EMEA, he indicated better line of sight for recovery and margin accretion (25-50 basis points into 2027), driven by new business and customer program launches, despite delays due to legislative and competitive pressures. EVP and CFO Mark Oswald explained that the -$37 million cash outflow from commercial negotiations was indeed a timing mismatch, with benefits pulled ahead into Q1, and that this timing would help free cash flow in the back half of the year.

Joe Spak asked for more details on GM's evolving hybrid portfolio, its inclusion in the $10 billion-$12 billion CapEx guidance, and whether all vehicles will utilize the next-gen software-defined vehicle (SDV) architecture launching in 2028. He also sought clarification on the split and nature (temporary vs. ongoing) of the $1 billion-$1.5 billion onshoring and software expense.

Answer

Mary Barra, Chair and CEO, confirmed that all discussed products are comprehended in the CapEx guidance and that the next-gen SDV platform and Super Cruise will be available across both ICE and EV platforms. She noted GM is evaluating hybrid demand segment-by-segment. Paul Jacobson, EVP and CFO, estimated the onshoring and software expense split at about 50/50, with onshoring costs being temporary and software expenses ongoing investments in technologists and programmers.

Joe Spak asked for more details on General Motors' evolving hybrid portfolio, whether it's included in the $10B-$12B CapEx guidance, and if all vehicles will use the next-gen architecture launching in 2028. He also sought to unpack the $1B-$1.5B in onshoring and software expense, including its split and temporary vs. ongoing nature.

Answer

Mary Barra, Chair and CEO, confirmed that all discussed products are comprehended in the CapEx guidance and that the next-gen software-defined platform and Super Cruise will be available across both ICE and EV platforms. Paul Jacobson, EVP and CFO, estimated the onshoring and software expense split at roughly 50/50, noting onshoring costs are temporary while software investment is ongoing.

Joe Spak asked about the Digital Data Networks (DDN) segment, specifically if the non-AI portion is slowing or declining sequentially given the overall flat revenue guidance, and whether the raised AI forecast is constrained by capacity or includes conservatism.

Answer

CEO Terrence Curtin clarified that AI programs grew sequentially from Q4 to Q1, and the Industrial Solutions segment is expected to grow sequentially from Q1 to Q2. He stated that the bulk of the $200 million AI increase will come in Q3 and Q4 as new programs ramp, extending into 2027. He emphasized strong momentum, reflected in 70% year-over-year DDN order growth, and denied any capacity constraints.

Joe Spak inquired about the Digital Data Networks (DDN) segment, specifically asking to understand why non-AI revenue might be slowing or declining quarter-over-quarter if AI growth continues, and whether the raised AI forecast is constrained by capacity or reflects conservatism given a potentially higher run rate.

Answer

CEO Terrence Curtin clarified that AI programs grew sequentially from Q4 to Q1, and the Industrial Solutions segment is expected to grow sequentially from Q1 to Q2. He stated that the bulk of the $200 million AI increase will materialize in Q3 and Q4 as programs ramp, extending into 2027, and affirmed that the forecast is not constrained by capacity, with DDN orders up 70% year-over-year.

Joe Spak inquired about the factors contributing to the lower Q4 margin guidance of 11.8%, especially given Q3 performance and historical sequential improvements. He also asked for clarification on the copper price impact on margin versus dollar earnings and about the growth opportunity in non-automotive areas like energy storage for both EDS and ECG segments.

Answer

Varun Laroyia (EVP and CFO, Aptiv) attributed the Q4 margin outlook to weaker volumes, a $15 million customer recovery timing shift from Q4 to Q3, and elevated copper prices. Kevin Clark (Chair and CEO, Aptiv) added that FX (Mexican peso) and copper had a year-over-year impact north of 100 basis points. Mr. Clark highlighted significant non-automotive opportunities in energy storage, robotics, and drones, noting these revenues are approaching $3 billion and growing mid-teens, with the software portfolio (Wind River) over $600 million and growing over 20%.

Joe Spak from UBS Group AG followed up on the discussion about investment in automation, asking when these investments are expected to start and how quickly the associated savings can be realized. He also sought clarification on the EV program cancellation charges mentioned for Q3, specifically if they were included in the results and if their recovery is factored into Q4 guidance.

Answer

Timothy Kraus (Senior Vice President and CFO, Dana Incorporated) explained that some EV investment dollars would be redeployed into automation, with a more deliberate and accelerated approach as cash flow improves post-transaction. Bruce McDonald (Chairman and CEO, Dana Incorporated) noted these are 'fairly short payback' investments. Regarding EV charges, Kraus confirmed that approximately $8-$10 million in costs related to canceled EV programs were booked in Q3 adjusted EBITDA, and Dana anticipates recovering these amounts in Q4, though they are non-contractual.

Joe Spak asked about the drivers of the strong implied Q4 free cash flow, key factors for 2025 free cash flow, and requested a refresher on the synergies between the Off-Highway division and the rest of Dana's business.

Answer

Timothy Kraus, SVP & CFO, explained that strong Q4 cash flow is typical due to business seasonality, driven by working capital and CapEx timing. He noted opportunities for further working capital improvements in 2025. James Kamsickas, Chairman & CEO, described the synergies as extensive, with the Power Technologies group supporting all three end markets (Light Vehicle, Commercial Vehicle, Off-Highway) with thermal, sealing, and electrification capabilities, making the businesses highly interconnected.

Joe Spak questioned the company's strategy for its debt tender offer, specifically which debt securities it would prioritize, and whether the anticipated lower interest expense was factored into the Q4 EPS guidance.

Answer

Andrew Lynch, Sensata Technologies' Chief Financial Officer, stated that due to the ongoing tender offer, specific details on preferred notes could not be disclosed. He noted that interest earned on cash roughly offsets the interest expense on the 2029 notes, so no material impact on Q4 net interest or EPS guidance is expected.

Joe Spak from UBS inquired about the specific debt securities Sensata would prioritize in its tender offer, given the higher cost of the five and seven-year notes, and whether the lower interest expense was factored into Q4 EPS guidance.

Answer

Andrew Lynch, Sensata Technologies' Chief Financial Officer, stated that due to the open tender, specific retirement preferences couldn't be disclosed. He noted that interest earned on cash roughly offsets interest on the 2029 notes, and no material impact on Q4 net interest was expected from the tender.

Joe Spak from UBS followed up on the European market commentary, asking if there was decontenting on higher-end vehicles in addition to segment shifts. He also sought clarification on the implied Q4 gross margin step-down, inquiring about factors like VOXX contribution and potential semi-tariffs. Lastly, Mr. Spak requested an update on Full Display Mirror (FDM) sales, especially given potential lower EV demand, and the outlook for 2026.

Answer

President and CEO Steve Downing confirmed that both changing vehicle mix and decontenting on higher-end vehicles are occurring in Europe as OEMs seek to lower costs, partly due to tariffs. He clarified that the Q4 gross margin step-down is primarily due to VOXX representing a higher percentage of total revenue and seasonally lower sales levels around the holidays, not structural cost issues. COO and CTO Neil Boehm reported strong FDM growth in Q3 and Q4, projecting 200,000-300,000 more units sold in 2025 than in 2024, with continued growth expected into 2026.

Joe Spak asked for color on the second Surround ADAS nomination, specifically what factors secured the win, the level of integration, and whether rollout would be on new models or refreshes. He also requested an update on other advanced Surround engagements and if SuperVision engagements are shifting towards Surround.

Answer

Nimrod Nehushtan, EVP of Business Development and Strategy, explained that the decision to upgrade from EyeQ6 Lite to EyeQ6 High was driven by the OEM's desire for consolidated ECU architecture, routing multiple sensors (cameras, radars) to the EyeQ6 High for richer sensing and user offerings like hands-free driving and advanced NCAP compliance, at a reasonable added cost. He noted that rollout would be a combination of new architectures and existing ones. Nimrod Nehushtan clarified that the trend is more about Base ADAS engagements expanding to Surround, rather than SuperVision engagements shifting, and that Mobileye has many engagements, preferring to disclose nominations when concrete.

Joe Spak asked for details on the recent surround ADAS nomination, including the factors that led the customer to choose Mobileye, the level of integration, DXP involvement, and whether the rollout would be on new models or refreshes. He also requested an update on other advanced surround engagements and if SuperVision engagements are shifting towards surround.

Answer

Nimrod Nehushtan, EVP of Business Development and Strategy, explained that the decision was driven by the OEM's need for system simplification, consolidating sensors to the powerful IQ6 High chip for richer sensing and advanced ADAS requirements, at a reasonable added cost. He noted that the IQ6 High can also consolidate parking and driver monitoring systems. The rollout will be a combination of new architectures and existing ones. He clarified that base ADAS engagements are expanding to surround, rather than SuperVision engagements shifting, and Mobileye has many ongoing engagements, preferring to disclose nominations when concrete.

Joe Spak inquired about any structural differences impacting incremental margins between the Communication Solution, Harsh Environment Solution, and Interconnect & Sensor Systems segments, and the potential for AISS to achieve 30%+ incrementals.

Answer

CFO Craig Lampo stated there are no structural limitations preventing any segment from expanding margins. He noted that the Communication Solution segment's high organic growth (74%) required some cost additions. He expressed pride in AISS achieving 20% operating margins and a 30% sequential conversion margin, confirming its capability for future expansion.

Joe Spak from UBS inquired about the specific drivers for the Q4-weighted EBIT, asking if it was due to production schedules or recovery timing. He also sought clarification on the net tariff impact in H2 and asked about Magna's opportunity regarding GM's announced production shifts back to the U.S.

Answer

CFO Patrick McCann explained the Q4 weighting is a combination of typical Q3 production shutdowns and the back-ended timing of commercial and tariff recoveries. He clarified that tariffs, which were a headwind in H1, are expected to be a net positive to EBIT in H2 due to the timing of recoveries from signed agreements. CEO Seetarama Swamy Kotagiri added that Magna is well-positioned to support OEM production rebalancing but is focused on capital discipline before making new investment decisions.